i'm jim cramer. and welcome to my world. >> you need to get in the game! >> goes out of business and he's nuts! he nuts! they know nothing. "mad money" you can't afford to miss it. hey, i'm cramer.

welcome to "mad money" and i'm trying to help you save some money. my job is not just to educate. there are some things i have been keeping from you. it's not fair. tonight i'm going to do something about it. i'm going to tell you who i am and how i got here. not a am jim cramer, that plus an avatar and 140 characters sums up everyone these days. i want you to know more than that. what i want to do tonight, is trace the arc that brought me to "mad money." not for some ego trip but to give you some lessons from the faces of my various careers and how you can profit from them. remember, in the end, this is cramerica. in short i am going to give you the invest or guidebook.

i want to tell you how i became a good investor and how i continue to learn every day. and that is the goal of "mad money". my love of stocks didn't begin after high school or college or law school. my love of stocks started back in 4th grade. you see my dad would bring home the old "philadelphia bulletin" when he returned home from work every single night. i want it had for the comics and sports. i was a phillies fan. if i could go back in time, i would have somehow made it so i was a yankee fan. they have the most professional losses in history. curiosity has been a blessing and kurt of mine. there was a solid chunk of the paper that seemed inpenetrable to me. the business section. it had this giant list of names

that went on forever. they were the other tables. different than the tables and box scores. when you read them from left to right they made no sense to me. open, range, closed. what were these strange things and what did they matter? i asked my dad because i would hear him get mad. buy, buy, buy! >> when he heard prices mentioned on the radio. he would get angry when i heard the name, national video on the radio and how it went out. i didn't know what it did and why it went out. i don't know if pop did know what it did. but i wanted to find out more of what these things are that made him react with such fury. he explained that each of those lines were the performance of a company on a different day. where the stock opened on the new york stock exchange on the open and the close was how it was worth when it finished for the day. it fascinated me.

how could there be so many company can companies? and what did it mean to close? he described to me that people wanted to buy them to make money from their increases. this struck me as downright silly. i told him when i looked at the baseball figures i was trying to figure out who was hot and who would go up in average and what it meant for the teams. he said it was pretty much the same thing with stocks. you study the companies like you study the players. some players were doing okay and some were hot as a pistol and some were done. i said i wanted to try to figure out which were going to go higher. just as everyone else was trying to figure it out. i wanted to know if i could try to learn something just following the rangers and following the tables. he said why don't you try. it seems in my house that the radio was always on. we watched the news while eating and it was the war in vietnam.

it seemed frooigtful even -- frightful even in real life. even when i was nine years old my mom was worried that i was going to have to go to the war in vietnam. but after the world news they mentioned the dow jones industrial average and they talked and showed the more active stocks. and the ones that had done the best or worst. national video was all for the worst. hence the anger. what i did was write the names down that i heard and i tracked them. i kept them in this ledger, this ledger i still have. you can see it. how did klm go out? there is mgm. mag vox, poile polaroid, that was a real winner. i would put them down and look at that, there is a winner. anyway, it was a game. i was trying to figure out the next move of a stock even though all i really new was the name continental and the name rca. whatever.

most were defense stocks. they went in tandem with the war i heard about. so i followed a lot of those and a bunch of others. and this was a cool game. coolest game imaginable. and i wanted to introduce it to my fifth grade class. so i did. showing them my ledger and i have to admit that not everyone to play to find stocks that went up the next week. but the darnedest thing happened. represented at 3m corp. and the manufacturing company selling tape and fancy ribbon that bowed easily. that was when you had to make your own bows. triple m was always coming up with new product lines. still does, which is one of the reasons i favor them in the show and you should, too. right about fifth grade pop came home with a new line of 3m products that they were selling. book shelf games. he said we might want to learn how the stock market worked.

the company had created two games about business, acquire, and stocks and bonds of which i'm fortunate enough to have gotten a real copy right here. courtesy of the producer of the show courtesy of the holidays. i loved the games so much. shady brooks development. try city. well, maybe he has a 13 deal right now. i asked the ceo to bring these games back. i don't know if he will. the point is that the stocks and bonds and stuff off ebay, stocks are fascinating now get your kids started on them right now. when you have your kids started on stocks and bonds pick some stocks. they are performing in a good way, given the budget pressures,

but if companies maybe your kids are familiar with. guess what they will do over a period of time. so here is the bottom line of my childhood stock market obsession. get them started early and maybe they will play for life. the stock market is a long-term contest and one i think the earlier you get in, okay, the more you can win. let's go to loretta in arizona. >> hi captain cramer a big booyah to you. from phoenix, arizona. >> love phoenix. what's up? >> okay what steps should an investor take when a company they thought was solid with a strong monthly dividend suffers a steep drop in price and a 50% dividend reduction? hold them or fold them? >> a lot of the monthly ones are oil related.

freeport a few years back cut the dividend. that of course is copper and gold. don't sell it. do some work. it might be the bottom. it can mark the bottom and i think that is what you have to be thinking about. john? >> windy city booyah to you cramer. >> nice what's up? >> thank you for what you do for us and thank you help get my son through colorado state university. >> congratulations to you. i want to thank my staff because it is a team effort here to make things great. how can i help? >> i got an e-mail from one of my holdings and they said they are going to do a five to one reverse set. i know what a reverse set is but question that it is five to one, is that a red flag or should i get out? or something not to be concerned about? >> the damage is probably done. the stock has gone down so low.

people feel it's not investable. they split is back. they put it back and it goes higher. it is going to go back to one. i suggest you hold it. if the company is doing poorly. sell sell sell. >> irving in nevada. >> hello. >> hey, irv. >> hello. >> you got me. it's cramer go ahead. >> look, i'm irving from las vegas and i'm because of you and you have been wonderful things that you have been doing for people and for me i got into the stock market at the age of 90. >> fantastic, sir. >> isn't it the greatest don't you love it? >> because i have been listening to you for many years without doing anything, but at the age of 90 -- i'm 92 now. >> you are just getting started you got a couple of bull markets and bear market ahead of you.

what's up? >> which way is it better to buy stock, preferred or common? >> preferred i happen to like the bank. you have to figure out what is out of step. a lot of preferreds turn out to be terrific an turn out to be the best in show. common has more upside. i like to follow the common stocks. they give you better award but more risk. but i think you are doing terrifically. tonight i'm sharing all of my investing memories and giving you lessons i have learned. my first pearl of wisdom, why not get them started really early? teach the kids about investing it is a life-long skill. we will be right back. >> don't miss a second of "mad money" follow on twitter. have a question, tweet cramer. send jim and e-mail to madmoney@cnbc.com or call us at 1-800-743-cnbc.

miss something? or head to madmoney.cnbc.com. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs. there's no going back. clamp. glitter. [ male announcer ] staples has everything your business needs. even custom banners. and now get 50% off banners and posters. staples. that was easy.

welcome back to a bizarrely special "mad money." i'm not a dollar sign represented by a man or a stock symbol for that matter, i have stumbled around the market enough to know a thing or two. tonight you are getting some of that wisdom from the school of hard knocks. don't you love at the beginning of a football game, jim cramer when it comes to stocks? that is what you are getting the on tv version right here and

right now. you learn how to trade and the greatest game, no, not monopoly, stocks and bonds. and all of the little cool doo dads. what would send the stocks higher? you keep track. i left the stock market games behind me by the time i got to middle school. junior high it was called back then. i was the second fastest guy in the school so i ran track and then girls certainly ran them so i couldn't win for losing. but that is a subject of a different show. my father engrained in me the desire to save. i saved as i bussed tables as the old block and cleaver and a

vendor at veteran's stadium and then selling iced cream. vanilla and chocolate. i learned quickly the value of market power and cornering the market. hey, iced cream on the 600 and 700 level. can you imagine how much money could be made if you had the only franchise on the upper deck. even for the phillies. except the one time when they only gave me strawberry iced cream. talk about having to run from a customer when i sold him that stuff. or when mitch carlton pitched? he struck players out so fast that i would get stuck with unsold ice cream and i would get beat with it. talk about learning how business worked. the shelf life of ice cream after the 9th inning is as short as short can be. during the lightning round i might jest with you about your name. i will call you hey captain or skip or chief i learned those names at the park.

that is what people called me to get my attention. i loved it. first bizarre intimacy. hey, bud, i mean partner. i made a ton of money. on the advice of my father i opened up a account atrophy dealt. peter had one of the best books of all time. i didn't save enough when i went to college, but when i got out of college, i landed a position. i was a reporter making $156 a week. i still keep a taterred pay stub in my wallet to remind me how hard it was to get started. not long after i got a job, a horrible job making $179 a week,

in los angeles i found a bungalow apartment, soon after i was stalked, i was broken into repeatedly, something the cops were helpless to stop. they said do you think we're cojack? i was asipd a story san and when i returned everything was gone. it was like a big moving van came. it began in my car trying to get by. i met a woman who was easy to figure out the end of a night query. i know this isn't your normal behavior. my goal was to save, but i was hand to mouth. people would take me in now and then but i never quit saving.

that is why i'm giving this autobiographical stuff. i wrote a check to fidelity magellan fund. if you are living in your car, you are saving on homeowners insurance. how poor was i? yet still putting money away. and then i got sick a yellow spot about the size of greenland like one of those potato projections on my stomach? i had no health care. and the company put me on the road so i could submit some expenses so i had to go to a migrant farm workers clinic to get fixed up there. i still put money away even as i was making weekly trips to the farm workers clinic. which by the way i had a doctor who was one of the best i ever had. the upshot of investing while you were living in your car, i managed, if you add it up 35 years later, i

managed to put enough money away to teach, money amounted to a fund well into the six figures. i stopped putting money into that years ago. because of the power of compound. the amazing investors at the helm made a ton of money. just let it build. i think the take away here is that i want you to save no matter what. no matter what. the earlier the better through thick and thin. when cnbc has the all-star managers on. don't have enough time or money to handle your own stock portfolio, send the money in as little or as much as you can. if i could still send those checks to the fidelity fund living in the back of my car, and saved by a pistol by my side, you can put away some money too, stay with cramer. >> taking control of your financial destiny is smart. but why would you go it alone? >> something that has a much larger bearing on you and the

stock market as a whole. let cramer be your guide. your sounding board. >> i'm having a hard time with my favorite stock. and your coach on the road to financial independence. "mad money" week nights on cnbc. this is $100,000.

we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger, you need an ally. ally bank. your money needs an ally. sic: "make someone happy" music: "make someone happy" ♪it's so important to make someone happy.♪ ♪it's so important to make someone happy.♪ ♪make just one heart to heart you - you sing to♪ ♪one smile that cheers you ♪one face that lights when it nears you.♪

♪and you will be happy too. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location. >> you are why i come out here and do this show. thank you so much. >> the stuff you are doing is so important and i want to say

thank you. we count on your help. >> put cramer's experience to work for you. "mad money" weeknights on cnbc. >> we are riding the money mystery tour. ♪ hallelujah >> and i'm giving you the life lessons i've learned the hard way. i told you about how to get your kids started early and about living out of the back of high car. >> and it is still totally worth while and yes, it is the reason i believe you watch. that is unless you like the

funny outfits that i don. and the outrageous sound effects. i used to have a radio show called "real money." if you were picking stocks you need an account. i had my money with fidelity. so i chose to put my stock account there. i turned to forbes. the people at "forbes" do not take this personally. i read an article about an orange grower in florida so i bought ten shares of it for $9. a week later frost hit and wiped out the entire crop. i was devastated but not defeated. i took the shares of bobby brooks.

a clothing outfit i heard of. almost immediately the company reported a bad quarter. i had a job making 20 g's living on 44th twice the rent for a beautiful one bed room in florida allowed me to replenish my stocks. after a night on the town, i fell in love with a breakfast at bob evans farms. i went to the library and devoured everything i could about bob evans farms. they had articles and microfiche.

compared bobe with others. i knew i had a good one and i bought 20 years and i figured out the good first component of investing, know what you own. like it even. what did i know about growing oranges or women's fashion? scrambled eggs and sausages in an attractive setting, but a company of good service and nice enough growth plans to expand that was for me. next up a company from my old town. jim, if you are in a jam they are hiring at sps. he said that are paying good money. but back to the library for more research. solid company, no debt but nothing about the hiring push. it doubled. 23 years later sps would be

acquired by precision cast parts. and one i'm liking right now. the best investment ideas come from what you know, and you meld that information with that of public sources and that is good enough. there was a problem here. i didn't like the random way i was making money. a friend from home calls about a job and a hearty breakfast, there has to be a more methodical way? look around at work. at the time i was covering mergers and acquisitions, and small to midsize oil companies

were being acquired by majors. checked out the pages to find out which one could be acquired without problems. i settled on this thing and i doubled my money. if you want to buy takeovers get companies that do well but are undermanaged. that meant another oil company with bigger scale could do more, which was cheaper than it should be. as much as i had hit winners though, i was distraught that i had given up the ghost in those first few trades.

at the time i had given up the track on weekends though. i had learned how to handicap by reading the books by andy byer. he wrote two books picking winners. how to find the best long shots. you are sitting there looking for something to do. find the ones where the payoff is more sure and bet big. think about it, every one of these lessons could be applied to the stock market. you can take a huge swing and know what you are doing particularly when others don't. don't let your losses pile up. i decided to hang it up and go back to law school. all in the stock market as i would never have been able to

make enough. let's be clear an index fund would have made me nothing at all. go small, invest in what you know and research it intensely. back then i got old data from the public library. now it's as simply as a keystroke and the information is free. and of course the conference calls that i tell you are musts if you are going to know what you are doing. simple? no. lucrative? you bet it is. kien in new york. >> question, what could be considered a quote good rate of return? >> i think what you are always trying to do is measure it against bonds if you can get something twice the risk free rate and the tax on it, then you are going to do real well. if you look the ten year, you

can measure against the 30 year, you want to get six, seven, eight. you are doing great. john in north carolina? >> hey, what is going on. >> not much how are you? >> doing good. so, i'm new to the market and i've been watching the show and reading the "mad money" book which has been very helpful so thank you for that. >> my question is when i'm doing valuations and i'm calculating p.e.g.s, which number should i use? >> when you are doing the growth ratios look at the forward next year. i don't like to look at historic. you got to go and get the estimates. get them on yahoo!.

want to get started? look for things you know and research it until you can't research it anymore. you are surrounded by information so use it. stick around. i've got more lessons from my investing experience coming up. stay with cramer. >> keep up with cramer all day long. follow @jimcramer on twitter. [ male announcer ] this is not my home.

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tonight's show is about learning from my attendance at the university of hard knocks. i have shown you how to spot winners and avoid losers through the actual life examples of when i was younger. now i'll give you a sense of how to become a trader if you want to and when to become a good one. this show has changed. i skewed it away from trading and toward investing. you have to watch the positions to the point where it is hard to

do your job and follow the market. there are so many products that allow hedge funds to move around stocks like toys. you have to move one-on-one with the big boys. but there are advantages that you have now. commissions are so much lower. you can do it on your computer and your smartphone. trading is lightning fast. when i was at class you had to use a payphone, no cell. at the same time i had to go with what i knew.

i can tell you there was a ton of downtime and real good business library nearby as well as up-to-date microfiche reports, all the things i considered that i possessed. the first thing i decided to do was to work on finding one trading idea per week. you can't be all over the map. i discovered i had to look for stocks that could rally based on the other parts of the paper. an article on the front page talking a breakthrough, i got on a roll. i wrote a newsletter which was

called "mr. bullish". i would do no trade unless i could explain what it would do. when you trade, you must trade with confidence. you could be shaken out by the market. if you want to trade with confidence, ask yourself. would you put a stock recommendation on your voice mail? yeah, i actually did that every single week. i had that level of conviction about my pick of the week. you got to have that. i was putting that money where

my mouth was and augmented winnings with work i was getting and legal work for a professor who moonlighted during criminal defense cases. a publisher tried to get me to write a piece. i didn't call him back and i got three weeks worth of trades of the week and he wanted to give me half a million dollars to manage. he had confidence in me. he gave me a check for a half million dollars, which was real money back then. almost immediately i lost a ton of it. my mistake?

a man has got to know his limitations. you can't trade a huge ton of money at once. you can't put it all to work at once. you have to have an entry point that was reasonable and knowing that you would be good whether it worked or not. i violated my own rules and i confessed to marty. he wanted to give me more money. he was right i tried to be right about one idea at a time. going big when i had the most conviction. i paper invested in more active and truly traded portfolio. if you are going to trade, have a catalyst, an exit point where you are out either way, because

you need conviction. would you be willing for the world to hear, hi it is me, i'm not here right now but i want you to try disney. if you can do all those things give it a try. stay with cramer. >> you have done your homework. you are ready to buy. but how do you know when the time is right? ask cramer. "mad money" weeknights on cnbc. [ female announcer ] today, jason is here to volunteer to help those in need. when a twinge of back pain surprises him. morning starts in high spirits, but there's a growing pain in his lower back. as lines grow longer, his pain continues to linger. but after a long day of helping others, he gets some helpful advice. just two aleve have the strength to keep back pain away all day. today, jason chose aleve. just two pills for all day pain relief. try aleve d for strong, all day long sinus and headache relief. i work for 47 different companies. well, technically i work for one.

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tonight you are following

the early stages of my own career, and i'm taking you through the importance of starting investing early, the need to put away money no matter what, the ability of knowing what you own. now we are up to the professional grade and my time when i started at goldman sachs. i'd been courted for three years before i got a job. i've got a ton of history. you can always get the skinny of my goldman days by studying at the university of hard knocks.

i will try to teach you how to make money by the events at goldman. first, that is where i began making money, the ability to build a portfolio from the ground up. i had the best teachers in the world. hardly an hour went by when i didn't hear a great new idea walking down the halls. but i really learned from my customers. wealthy individuals can and do beat the market quite regularly. i wasn't allowed to invest anyone else's money with my own ideas unless i could convince people to act on it. i learned how important it was to talk over a story with the individual. can you do that to someone if

you were picking a stock? you had to know your stuff. i knew that stocks go down. if the stocks went down they would be mine. what else did i learn? it was at goldman sachs i figured out how humbling the business could be. when an idea went against you, you had to get on the horn and explain whether to buy more or how to cut your losses. i also learned to let your gains run while you cut your losses. men in my class didn't know that much about stocks.

they had been fabulous at their owner enterprises. i had a real estate tycoon. i had to work hard and get it right by him. he said he didn't want trades. he only wanted long-term investments. at the time i liked kimberly clark. the paper company. i told him i thought it would be terrific. he bought 8,000 shares and this was a big one. i wanted to ring the register. i thought he would thank me. but he was furious. he told me that i had said that kimberly would be good for the long-term and he wasn't the

least bit interested only making $8000. he wanted to know if i was trying to churn him. just as you don't want to turn a trade into an investment, you don't want to turn an investment into a trade. you have a good one, let it run. kimberly ultimately doubled. finally understanding how to create long-term wealth, a lot of contact with people who came into a great deal of cash. i was trying to figure out what they wanted. i tried to urge them to get to know themselves and their risk level of tolerance.

just as you should know yourself. would you prefer your money appreciate slowly? do you want to try to hit it out of the park with some of your capital? many of you are familiar with these lessons you have heard me say on many a night. i learned the value of diversification. then i got to the oil sector. there are huge places in this country that no one had discovered yet. i wanted oils and every day seemed like another great day in the oil patch, and then one day oil plummeted. saudis pumping like mad.

i never intentionally avoid diversification. i learned from goldman sachs, finding solid ideas to build a portfolio to create long-term wealth in a way to suit the customer. consider yourself the customer of this show. remember all of the investors beat the market in ways that they like aided by people like me who work with them to put a plan into action. "mad money" is back after the break.

our tour of the early lessons of my life's journey into the market is drawing to an end. the importance of getting started early in investing. you learned about me getting started in the car. you learned how to find the good ideas and how to research them

and know them cold. and you stumbled along with me to find the goodness of long term investment. i hope you have been able to take away a ton of information and glean insights from my mistakes and best of all, i want to wish you success, and to remind you when you hear from the gray beards that you can't make money at home that the story of my life is very much the opposite and you can make money in different ways by yourself. stick with cramer. >> stay connected to cramer on madmoney.cnbc.com.